You can thank “subdued economic growth and slack in the labor market” for a holiday rate cut from the Bank of England.

The Thursday move, at the bank’s final policy meeting of 2025, was widely expected after four voters dissented in favor of a cut at last month’s decision.

The vote split was the same in December, 5-4. This time, Andrew Bailey sided with the doves, even as he suggested the bar for additional cuts gets higher with each reduction to Bank rate.

“We still think rates are on a gradual path downward, but with every cut we make, how much further we go becomes a closer call,” Bailey said Thursday, echoing the forward guidance from the new statement.

As the figure shows, this marked the sixth cut of the cycle, the longest and shallowest BoE easing sequence of the post-War period.

Although inflation decelerated more than expected in November thanks in part to falling prices for cakes and biscuits (“Let them eat cake! Hell, they might even be able to afford it this year.”), services price growth’s still stuck well north of 4%.

While editorializing around last month’s BoE meeting I cited that latter statistic in joking that nothing says “cut rates” quite like services inflation running above 4%. “Fortunately for the dove case,” I went on, “Rachel Reeves’s budget is very likely to weigh on demand, which could help attenuate upside risks to inflation.”

Fast forward six weeks and ONS said unemployment hit a five-year high in the three-month period to October, when the jobless rate for those aged 16-24 hit a harrowing 16%, the highest in a decade. The proximate cause (and as a liberal-minded person, it pains me to admit this): Higher national insurance contributions and a minimum wage hike mandated from April as part of Reeves’s prior-year budget.

The line from higher unemployment to lower inflation isn’t straight, but it almost is. If you don’t have a job, or are having trouble finding one despite your best efforts, you’re less likely to spend. Lower spending is less money chasing available goods and services. That, in turn, is the recipe for slower inflation.

Still, the BoE has to be cautious. They operate on a single mandate, and they simply aren’t meeting it. The figure below, updated with the latest survey data (from November), reminds you that the bank’s net public approval rating went negative for the first time ever in mid-2022.

The bank managed to reclaim a semblance of legitimacy over the next couple of years, but the best approval rating they mustered over the period was +6 in May of 2025. In November, they were back underwater despite a marginal (one-tenth) downtick in expected year-ahead inflation.

Thursday’s meeting minutes reflected the divisions in the vote split. “The recent experience of high inflation could still be affecting the way wages and prices were being determined in the economy, including owing to structural factors,” the account, released concurrent with the decision, read. “At the same time, households and businesses could remain cautious about their spending and investment decisions, and the labor market could weaken significantly further, lead[ing] to inflation falling below target in the medium-term.”

Remember: Economic theory says this sort of “tension” isn’t supposed to happen. Or if it does, it’s supposed to be exceedingly rare and generally — dare I say it — transitory.